Senate committee wants to know how the feds are handling Bitcoin, too

"We don’t have the best reputation here of being ahead of the curve," aide says.

In just one day, sources revealed, New York state regulators subpoenaed 22 Bitcoin-related companies, and a United States Senate committee wrote a letter (PDF) to the Department of Homeland Security asking for “policies, procedures, guidance, or advisories” pertaining to Bitcoin.

The letter from the Senate Homeland Security and Government Affairs Committee—dated Monday, August 12, 2013 but published on its website on Tuesday—cites an ongoing case in Texas involving Bitcoin Savings and Trust (BTCST). The BTCST was a virtual Bitcoin-based hedge fund that many suspected of being a scam. Earlier this month, a federal judge declared Bitcoin a “currency” and subject to relevant financial regulations.

The committee’s letter also asks for:

information related to any ongoing coordination of your agency with any other federal agencies or state and local governments related to the treatment of such currencies; and,

any plans or strategies regarding virtual currencies and information regarding any ongoing initiatives you have engaged in regarding virtual currencies and the name of the person most knowledgeable about any such plans, strategies, or initiatives.

The federal government has certainly accelerated its policies on Bitcoin in recent months.

“Talk to anyone in Silicon Valley or in New York—we don’t have the best reputation here of being ahead of the curve on a lot of these issues,” an anonymous committee aide told Politico.

In July, the Drug Enforcement Agency is believed to have seized its first cache of bitcoins in a criminal case. Earlier this year, a US federal agency, the Financial Crimes Enforcement Network (FinCEN), published new guidelines stipulating that Bitcoin-related businesses should be considered as Money Services Businesses under US law.

UPDATE 3:01pm CT: Patrick Murck, the attorney for the Bitcoin Foundation, wrote Ars to say that complying with the demands of the subpoena would costs tens of thousands of dollars:

"Legislators and regulators seem to understand that they must come to terms with a world in which Bitcoin and other digital currencies play a significant role in our economy. It seems to be a good time to have an open dialog about what regulation is feasible and what regulation is desirable. This is particularly so in the US, where New York's recent actions, issuing subpoena's to an entire industry, demonstrate the need for oversight, so it's good to see a Senate committee stepping up to provide it."

"[The subpoena] is extremely broad and onerous. Everyone I've spoken with who received the subpoena is amazed at the scope of the document request. While the [Department of Financial Services] says they want to have a conversation with the industry, their actions speak the language of aggressive litigation. It appears that the burden is on the industry to negotiate a narrowing of the scope of NY's request and shape a productive conversation."

Why would you be asking the DHS about a crypto currency? Shouldn't that be a Treasury Dept thing? Or maybe even the SEC? I think this is a case of the DHS pushing their "We police all things Internet" angle.

Why would you be asking the DHS about a crypto currency? Shouldn't that be a Treasury Dept thing? Or maybe even the SEC? I think this is a case of the DHS pushing their "We police all things Internet" angle.

It does seem like they're working a bit hard to try and tie BTC into organized crime and terrorism funding, I would love to see the SEC be a stronger presence leading into this inquiry. They've got the experience after all, dealing with electronic currency and online exchanges on a daily basis.

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

I don't know what the big fuss is, we all knew this was going to happen eventually.

So, because you 'knew it was going to happen eventually', you think that this is a good and wonderful thing and you support it wholeheartedly?

Yes, why wouldn't it be a good thing? Regulation of the economy and financial markets is critical to economic health and growth. Having a rogue player like BitCoin isn't necessarily a good thing. It remains to be seen whether it's a *bad* thing, however -- please consider that these BC-related companies have merely been subpoenaed for information and are not necessarily going to be in any sort of trouble or forced to change anything. (except for this BTCST company, if it is indeed a scam as accused)

I'm pretty sure the entire purpose of Btcoin was so that it's incredibly difficult to regulate. The only window into the process they have is the exchanges. and all you need is one in a friendly nation and it's game over.

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

My impression is that the committee is interested in how DHS deals with Bitcoin because of the sorts of things that BItcoin is associated with, as opposed to it being a crypt-currency. If it turned out that drug-runners and terrorists were known to settle accounts with baseball cards, then they'd be asking about baseball cards. Similar inquiries have revolved around blood diamonds.

Bitcoin really needs to hire a good PR firm and get its reputation out of the gutter.

The US government is sadly controlled by Wall Street for decades now. Look who every single US presidents appointed as their financial advisors and who is in charge of bank regulations and as well in the federal reserve. Look the names and this are the same fraudsters and economists that made mistakes after mistake. They are just incompetent or do mistakes on purpose. One of two. But while this people crash the whole economy they make millions themselves.

They always come from the private banking sector and usually from banks with an awful reputation. This is usually not bad (private sector), except this guys are the ones that scammed billions of people just a couple of years back, just in 2008 and they always keep pushing for less and less regulations for their own banks but at the same time want to regulate every single thing they consider competition to their own banking system.

The Obama administration promised banking reforms that never came, while this guys are pushing for an unregulated banking system, at the same time they want to regulate bitcoins, digital currency and every other business model they consider competition. Its nice to gamble with others people money...

This is the sad true. They will regulate bitcoins or even try to ban them completely, just because they want to keep up racketeering profits with their current banking systems which worldwide is nothing but a massive ponzi fraud. Banks can lend money they don´t even have. Not a single bank today actually has the money to pay out their clients. And usually governments need to bail them out, this means you and me with our tax money.

Just look who Obama named for their banking reforms he promised, the same guys that actually caused the economic meltdown and crashed several banks in the US. The sames persons that are against regulations for their own benefits, and this are the same guys that will push to regulate bitcoins and other e-currencies because there is no real democratic government. There are just some guys that make some phone calls and they can put or take away anyone in the office.

So believe one thing. Goverments are not a threat to Bitcoins. Banks are. Banks are the ones that are going to use goverments to push their own agenda like they always did. Just like when the Citi group merged had to happen, it was illegal so they changed the law:http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act

Banks are the ones that are going to push against any type of cyber currency. In particular those that are decentralized and they cannot control. Most people do not realize how bad this is. Nobody went to jail after massive frauds in 2008 which caused a global recession. And banks, together with the federal reserve change laws as they wish. This is bad, private companies changing government laws to benefit their own pockets and crush competition.

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

Existing rules assume that things like distance, amount and national borders are significant factors in a transaction. Furthermore, they assume that handling significant amounts of currency requires the help of a financial services company which can be regulated. None of that is true for Bitcoin.

For example, if you want to send $100,000 across the US border, the rules say you have to declare it and pass through Customs, with the assumption that you have to carry the cash in a suitcase (which would be spotted by TSA or CBP) or use a money transfer company (whose books can be examined by the Treasury, the FBI or several other law-enforcement agencies). Bitcoin lets you carry that much currency in your head (simply by memorizing a passphrase) and waltz through customs with no way for anyone to detect it. Heck, with Bitcoin, it's arguable whether the currency crosses any borders at all; after all, Bitcoin addresses have no physical location. So the rule no longer makes sense.

I have to wonder if once the u.s. government finally gets things figured out for bitcoin, are they going to have a hissy fit when they suddenly realize that Bitcoin is too specific and that there are a number of crypto currencies they may have to deal with?

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

Existing rules assume that things like distance, amount and national borders are significant factors in a transaction. Furthermore, they assume that handling significant amounts of currency requires the help of a financial services company which can be regulated. None of that is true for Bitcoin.

For example, if you want to send $100,000 across the US border, the rules say you have to declare it and pass through Customs, with the assumption that you have to carry the cash in a suitcase (which would be spotted by TSA or CBP) or use a money transfer company (whose books can be examined by the Treasury, the FBI or several other law-enforcement agencies). Bitcoin lets you carry that much currency in your head (simply by memorizing a passphrase) and waltz through customs with no way for anyone to detect it. Heck, with Bitcoin, it's arguable whether the currency crosses any borders at all; after all, Bitcoin addresses have no physical location. So the rule no longer makes sense.

That's the sort of thing lawmakers want to get their heads around.

See I get that "Bitcoins" don't have to cross the border and can't be tracked. But going from most other currencies to Bitcoins in any useful amounts should be trackable since you would have to use something like MTGX.

So using your example if you were to transfer 100,000$ from a US bank into a non-US bank (possibly converting to local currency) then there would still be a record of it. Now transferring 100,000$ into bitcoin (I'm ignoring mining BTC cause I don't think drug dealers are doing that) would require you to go through an exchange unless you can set up a private sale of 100,000$ worth of BTC. The same going the other way. Now it is slightly harder to track BTC from point A to point B since it could go to points C,D,E,F..Z as BTCs.

Also I may be out of the loop but is there any way to actually spend BTC on useful things. Is there a real black market where you can use BTCs to buy things?

Why would you be asking the DHS about a crypto currency? Shouldn't that be a Treasury Dept thing? Or maybe even the SEC? I think this is a case of the DHS pushing their "We police all things Internet" angle.

It does seem like they're working a bit hard to try and tie BTC into organized crime and terrorism funding, I would love to see the SEC be a stronger presence leading into this inquiry. They've got the experience after all, dealing with electronic currency and online exchanges on a daily basis.

I don't think that it's really much of a stretch to tie BTC to money laundering. I keep hearing that Silk Road is still the number one place to spend them after all.

See I get that "Bitcoins" don't have to cross the border and can't be tracked. But going from most other currencies to Bitcoins in any useful amounts should be trackable since you would have to use something like MTGX.

So using your example if you were to transfer 100,000$ from a US bank into a non-US bank (possibly converting to local currency) then there would still be a record of it. Now transferring 100,000$ into bitcoin (I'm ignoring mining BTC cause I don't think drug dealers are doing that) would require you to go through an exchange unless you can set up a private sale of 100,000$ worth of BTC. The same going the other way. Now it is slightly harder to track BTC from point A to point B since it could go to points C,D,E,F..Z as BTCs.

Also I may be out of the loop but is there any way to actually spend BTC on useful things. Is there a real black market where you can use BTCs to buy things?

Every day, more and more businesses accept Bitcoin, because for many, there's simply no real reason not to. Compared to standard merchant accounts, Bitcoin offers a number of compelling advantages, among them low fees and no chargeback headaches. And yes, there are several 'black markets' where contraband is traded for Bitcoin. Perhaps the most notorious is a site called the Silk Road, which is only available on the Tor darknet.

Maybe, but WTH does that have to do with BitCoins? Banks and hedge funds don't care about what currency they're trading in so long as they win more that what they started with. If Goldman Sachs could make $100 billion euros by nuking the dollar, they'd do it without a second thought or moment's hesitation.

I have to wonder if once the u.s. government finally gets things figured out for bitcoin, are they going to have a hissy fit when they suddenly realize that Bitcoin is too specific and that there are a number of crypto currencies they may have to deal with?

Regulations and legislation can easily be worded to encompass any digital cryprocurrency. Simply have a paragraph saying anything that applies to Bitcoin also applies to "any digital currency that does not have organizational or governmental backing."

I start to get the feeling that Obama is just a placeholder and The Face to show up and issue the decisions of the behind the scenes power guys. Whatever he stood for seems replaced by the Evil Empire's consensus. Goldman running the money, Clapper in charge of the NSA investigation. Supreme court in charge of FISA judges. Now trying to control Bitcoin? From the outside it looks like full takeover. The are very nervous and make lots of tactical mistakes, already harming US businesses.Declaring the whole world the enemy is preposterous and morally very wrong.

I'm pretty sure the entire purpose of Btcoin was so that it's incredibly difficult to regulate. The only window into the process they have is the exchanges. and all you need is one in a friendly nation and it's game over.

I'm pretty sure you were fed that belief by zealots who had no idea what they were talking about. Bitcoin is different than other currencies, but it will prove no more difficult to regulate. Regulation will simply have to be different in design.

Banks are the ones that are going to push against any type of cyber currency. In particular those that are decentralized and they cannot control. Most people do not realize how bad this is. Nobody went to jail after massive frauds in 2008 which caused a global recession. And banks, together with the federal reserve change laws as they wish. This is bad, private companies changing government laws to benefit their own pockets and crush competition.

While I agree that Banks are running the show, and are indeed the biggest backers behind ANY president, regardless of political affiliation, I don't think they stand to lose in a world economy full of Bitcoins. There's no reason a cartel of bankers can't corner the market on BTC.

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

Existing rules assume that things like distance, amount and national borders are significant factors in a transaction. Furthermore, they assume that handling significant amounts of currency requires the help of a financial services company which can be regulated. None of that is true for Bitcoin.

For example, if you want to send $100,000 across the US border, the rules say you have to declare it and pass through Customs, with the assumption that you have to carry the cash in a suitcase (which would be spotted by TSA or CBP) or use a money transfer company (whose books can be examined by the Treasury, the FBI or several other law-enforcement agencies). Bitcoin lets you carry that much currency in your head (simply by memorizing a passphrase) and waltz through customs with no way for anyone to detect it. Heck, with Bitcoin, it's arguable whether the currency crosses any borders at all; after all, Bitcoin addresses have no physical location. So the rule no longer makes sense.

That's the sort of thing lawmakers want to get their heads around.

Excellent description. God, the internet is seriously a God send to all of us, yes to atheists too =)

I don't know what the big fuss is, we all knew this was going to happen eventually.

So, because you 'knew it was going to happen eventually', you think that this is a good and wonderful thing and you support it wholeheartedly?

Yes, why wouldn't it be a good thing? Regulation of the economy and financial markets is critical to economic health and growth.[/quot]

Good regulation is good, bad regulation is bad. Aggressive authorities imposing huge costs on people before anyone gets a say in court is usually bad.

Quote:

Quote:

Having a rogue player like BitCoin isn't necessarily a good thing. It remains to be seen whether it's a *bad* thing, however ...

And yet you seem to beleive the benefit of the doubt goes to any agency wants to shut them down.

Trouble is people tend to see "regulation" as featureless abstraction and then (depending on their priors) howl for or against every attempt at regulating something, without waiting to learn the specifics.

I'm more interested in how this applies to other 'virtual currencies', like ISK for example. While not directly convertible to paper currencies, you can get there indirectly using PLEX (though 'cashing out' is more difficult, there's no rule to stop people paying for physical objects with ISK via an informal agreement).What is interesting is that various financial & confidence scams in EVE are not only tolerated, but almost encouraged. If ISK falls under any sort of 'virtual currency' regulation, does this mean that something that is completely acceptable in-game becomes illegal in real life?

I'm more interested in how this applies to other 'virtual currencies', like ISK for example. While not directly convertible to paper currencies, you can get there indirectly using PLEX (though 'cashing out' is more difficult, there's no rule to stop people paying for physical objects with ISK via an informal agreement).What is interesting is that various financial & confidence scams in EVE are not only tolerated, but almost encouraged. If ISK falls under any sort of 'virtual currency' regulation, does this mean that something that is completely acceptable in-game becomes illegal in real life?

It took me a while to realise you weren't talking about the very real currency also known as ISK (Icelandic Krona).

Maybe, but WTH does that have to do with BitCoins? Banks and hedge funds don't care about what currency they're trading in so long as they win more that what they started with. If Goldman Sachs could make $100 billion euros by nuking the dollar, they'd do it without a second thought or moment's hesitation.

Because they do not control bitcoins that is why. They don´t establish how much blank checks they can issue or how much fake money baked by a central bank just by papers they can show they have.

Banks are the ones that are going to push against any type of cyber currency. In particular those that are decentralized and they cannot control. Most people do not realize how bad this is. Nobody went to jail after massive frauds in 2008 which caused a global recession. And banks, together with the federal reserve change laws as they wish. This is bad, private companies changing government laws to benefit their own pockets and crush competition.

While I agree that Banks are running the show, and are indeed the biggest backers behind ANY president, regardless of political affiliation, I don't think they stand to lose in a world economy full of Bitcoins. There's no reason a cartel of bankers can't corner the market on BTC.

Because they can´t print a blank check with any number of Bitcoins like they do now.

They actually print as much money as they want. They do not have to own or have the money they lend, it does not exist. And since they control the federal reserve they actually control how much money supply they can issue. US Dollars or any currencies is not baked up by anything. Its thin air. Paper which you can eat. Bitcoins are the same if we go that route, its only trust, the user trusting the currency that makes it worth or not.

Before money was not worth anything, it actually had its price matched to gold or silver. Today money in most countries is just plain paper. Nothing. And if you go with digital money its just ones and zeros. It does not exist. Money is supposed to be the product of someones work in anyway. Making money out of thin air, or nothing is that causes economic meltdowns, because there is more money than actually people producing it. If you create enough money to make every one rich, nobody would work, nobody would produce anything, and you would not even have food in stores because nobody would plant or farm anything.

Money is supposed to be an exchange systems, but need to be created in the same rate as people, or the planet produces something, and this something is equally work. If I work on a farm 8 hours, I get something in return. If I create 1000$ from 1$ virtual dollar I created nothing. Its air, a bubble, and this is how banks where and are creating money, and this is the reason whey money is legal tender and its not actually worth anything. Because there are most people producing money that people actually producing something in the world, lets be it someone painting something, or writing an article, or planting tomatoes, or creating a new medicine, it does not mater what you create, but you create something. And money is supposed to created the same rate of people producing something.

This is not the case anymore for decades now. The federal reserve prints money based on nothing. On pure air, and banks can lend money they don´t even have, creating a fake bubble. Eventually there is more money that things you can do with it, and this caused the currency to go down. This is no different than war zones where money is used to make fire and warn people, because its worth nothing, it can lose all its value in no time.

Why would you be asking the DHS about a crypto currency? Shouldn't that be a Treasury Dept thing? Or maybe even the SEC? I think this is a case of the DHS pushing their "We police all things Internet" angle.

The United States Secret Service was moved from the Treasury Department to DHS when DHS was stood up as an agency, and the Patriot Act required USSS to establish Electronic Crimes Task Forces to investigate potential crimes that have significant economic or community impact, involve transnational organized criminal groups, or use of new technology as a means to commit crime.

I'd imagine that Congress is asking DHS for information that may have been compiled via these task forces.

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

Existing rules assume that things like distance, amount and national borders are significant factors in a transaction. Furthermore, they assume that handling significant amounts of currency requires the help of a financial services company which can be regulated. None of that is true for Bitcoin.

For example, if you want to send $100,000 across the US border, the rules say you have to declare it and pass through Customs, with the assumption that you have to carry the cash in a suitcase (which would be spotted by TSA or CBP) or use a money transfer company (whose books can be examined by the Treasury, the FBI or several other law-enforcement agencies). Bitcoin lets you carry that much currency in your head (simply by memorizing a passphrase) and waltz through customs with no way for anyone to detect it. Heck, with Bitcoin, it's arguable whether the currency crosses any borders at all; after all, Bitcoin addresses have no physical location. So the rule no longer makes sense.

That's the sort of thing lawmakers want to get their heads around.

See I get that "Bitcoins" don't have to cross the border and can't be tracked. But going from most other currencies to Bitcoins in any useful amounts should be trackable since you would have to use something like MTGX.

So using your example if you were to transfer 100,000$ from a US bank into a non-US bank (possibly converting to local currency) then there would still be a record of it. Now transferring 100,000$ into bitcoin (I'm ignoring mining BTC cause I don't think drug dealers are doing that) would require you to go through an exchange unless you can set up a private sale of 100,000$ worth of BTC. The same going the other way. Now it is slightly harder to track BTC from point A to point B since it could go to points C,D,E,F..Z as BTCs.

Also I may be out of the loop but is there any way to actually spend BTC on useful things. Is there a real black market where you can use BTCs to buy things?

Forgive me for not knowing the laws and what not. But since Bitcoins have been declared to be a currency shouldn't these questions just default to how we handle other currency. Is there an actual reason Bitcoins can not be handled under existing rules?

Existing rules assume that things like distance, amount and national borders are significant factors in a transaction. Furthermore, they assume that handling significant amounts of currency requires the help of a financial services company which can be regulated. None of that is true for Bitcoin.

For example, if you want to send $100,000 across the US border, the rules say you have to declare it and pass through Customs, with the assumption that you have to carry the cash in a suitcase (which would be spotted by TSA or CBP) or use a money transfer company (whose books can be examined by the Treasury, the FBI or several other law-enforcement agencies). Bitcoin lets you carry that much currency in your head (simply by memorizing a passphrase) and waltz through customs with no way for anyone to detect it. Heck, with Bitcoin, it's arguable whether the currency crosses any borders at all; after all, Bitcoin addresses have no physical location. So the rule no longer makes sense.

That's the sort of thing lawmakers want to get their heads around.

See I get that "Bitcoins" don't have to cross the border and can't be tracked. But going from most other currencies to Bitcoins in any useful amounts should be trackable since you would have to use something like MTGX.

So using your example if you were to transfer 100,000$ from a US bank into a non-US bank (possibly converting to local currency) then there would still be a record of it. Now transferring 100,000$ into bitcoin (I'm ignoring mining BTC cause I don't think drug dealers are doing that) would require you to go through an exchange unless you can set up a private sale of 100,000$ worth of BTC. The same going the other way. Now it is slightly harder to track BTC from point A to point B since it could go to points C,D,E,F..Z as BTCs.

Also I may be out of the loop but is there any way to actually spend BTC on useful things. Is there a real black market where you can use BTCs to buy things?